NEWARK—Federal agents in four states arrested 13 people today for allegedly creating thousands of phony identities to steal at least $200 million in one of the largest credit card fraud schemes ever charged by the Department of Justice, U.S. Attorney Paul J. Fishman announced.

The activity described in a complaint unsealed today describes a sprawling criminal enterprise that stretched across dozens of states and numerous countries. The defendants charged in the complaint allegedly fabricated identities to obtain credits cards and doctored credit reports to pump up the spending and borrowing power associated with the cards. They would then borrow or spend as much as they could based on their fraudulently obtained credit history and not repay the debts, looting businesses and financial institutions of more than $200 million in confirmed losses.

This morning, hundreds of law enforcement officers from the FBI and the U.S. Postal Inspection Service arrested 13 defendants and searched 13 locations in New Jersey, New York, Pennsylvania, and Connecticut. All the defendants are charged with one count of bank fraud. The defendants are scheduled to appear later today before U.S. Magistrate Judge Madeline Cox Arleo in Newark federal court.

“This type of fraud increases the costs of doing business for every American consumer, every day,” U.S. Attorney Fishman said. “Through their greed and their arrogance, the individuals arrested today and their conspirators allegedly harmed not only the credit card issuers, but everyone who deals with increased interest rates and fees because of the money sucked out of the system by criminals acting in fraud rings like this one.”

“The criminal activity described in today’s complaint highlights the activity of an extensive, sophisticated, organized scheme, executed against U.S. financial institutions, which, in turn, affects every citizen of the United States,” Acting Special Agent in Charge Velazquez said. “This elaborate network utilized thousands of false identities, fraudulent bank accounts , fake companies, and collusive merchants to defraud financial institutions of hundreds of millions of dollars in order to facilitate extravagant lifestyles they could otherwise not afford. The arrests today are the result of the relentless and tenacious work of the United States Attorney’s Office, U.S. Postal Inspection, U.S. Secret Service, the Social Security Administration, the Federal Bureau of Investigation, and numerous financial institutions.”

According to documents filed in this case:

The defendants and their conspirators stole hundreds of millions of dollars through a scheme repeated thousands of times to create more than 7,000 false identities and fraudulently obtain tens of thousands of credit cards (the “fraud cards”). The scheme involved a three-step process in which the defendants would:

“Make up” a false identity by creating fraudulent identification documents and a fraudulent credit profile with the major credit bureaus. “Pump up” the credit of the false identity by providing false information about that identity’s creditworthiness to the credit bureaus. Believing the furnished information to be accurate, the credit bureaus would incorporate this material into the false identity’s credit report, making it appear that the false identity had excellent credit. “Run up” large loans using the false identity. The higher the fraudulent credit score, the larger the loans that the defendants could obtain. These loans were never repaid, and the defendants reaped the profits.

The Sham Companies

The enormous size and scope of the Criminal Fraud Enterprise required the defendants and others to construct an elaborate network of false identities. Across the country, the defendants and their co-conspirators maintained more than 1,800 “drop addresses,” including houses, apartments, and post office boxes, which they used as the mailing addresses of the false identities.

They created dozens of sham companies that did little or no legitimate business, obtained credit card terminals for the companies, and then ran up charges on the fraud cards. To accept payments in the form of credit cards, a business must establish a merchant account with an entity known as a merchant processor. The merchant processor provides the business with equipment to process credit cards, receives payments from credit card companies for credit cards run at the business, and deposits those payments, minus a fee, into the business’ bank account. When the merchant processors shut down accounts operated by the conspirators for fraud, they would apply for new terminals and create new companies.

The sham companies also served as “furnishers,” providing the credit bureaus with false information about the credit history of numerous false identities of people who purportedly worked at or owned the sham companies.

Tradelines

The defendants used sophisticated methods—including a network of black-market businesses called “tradelines” providers—to commit fraud.

Tradelines come in two varieties: primary tradelines and authorized user tradelines. Primary tradelines are lines of credit in a credit history. If a credit card user has primary tradelines in good standing, it can have a significant impact on the user’s credit score, enabling the user to borrow more from credit card issuers. The defendants, however, trafficked in fraudulent primary tradelines.

A second kind of tradeline is the “authorized user” tradeline, where a credit card holder adds another, so-called “authorized user,” to a credit card account. This raises the credit score of the authorized user, who inherits some of the primary user’s credit history.

Some defendants created and sold fake lines of credit for false identities made up by other defendants. These fraudulent primary tradelines were then used to increase the credit limits on fraud cards, so that the defendants could reap even larger profits. Defendants used the authorized user tradelines to create new identities.

Complicit Businesses

The defendats also relied upon complicit businesses, including several jewelry stores in the Jersey City, New Jersey area to extract money from the fraud cards. The complicit businesses would allow the defendants to conduct sham transactions on the fraud cards and would then receive the proceeds from the credit card companies and split them with the other conspirators. These complicit businesses maintained multiple credit card merchant processing accounts at the same time. By operating dozens of accounts, these businesses furthered the conspiracy by allowing more fraudulent transactions to be processed before the merchant processors shut down the account. The proceeds from these merchant terminals were deposited into various business checking accounts, and the money was paid out to the owners of the complicit businesses, along with other defendants and conspirators.

Lavish Spending

The conspiracy generated enormous profits for the defendants—even though they spent millions of dollars sustaining the elaborate network of drop addresses and running credit reports on the thousands of false identities. Records of the New York and New Jersey Departments of Labor reveal that many of the defendants have no reported legitimate employment in the last five years. Nonetheless, the defendants used the proceeds of the criminal enterprise to buy luxury automobiles, electronics, spa treatments, expensive clothing, and millions of dollars in gold. They also stockpiled large sums of cash. Law enforcement discovered approximately $70,000 in cash in the oven of one defendant.

The defendants also moved millions of dollars through accounts under their control and wired millions of dollars overseas. An analysis of 169 bank accounts of the defendants, sham companies, and complicit businesses has identified $60 million dollars in proceeds that flowed through the accounts, much of it withdrawn in cash. The conspirators wired millions of dollars to Pakistan, India, the United Arab Emirates, Canada, Romania, China, and Japan. Due to the massive scope of the conspiracy, which involved over 25,000 fraudulent credit cards, loss calculations are ongoing. Final figures may grow beyond the present confirmed losses of more than $200 million.

The investigation that produced today’s arrests involved cyber crime investigators from the FBI and has been ongoing for more than 18 months. It previously resulted in the arrest of four other individuals and the seizure of more than $2 million in gold from a jewelry store in Jersey City.

The bank fraud count with which the defendants are charged is punishable by a maximum potential penalty of 30 years in prison and a fine of $1 million.

U.S. Attorney Fishman praised special agents of the FBI’s Cyber Division, under the direction of Acting Special Agent in Charge David Velazquez, for the investigation leading to today’s arrests, as well as postal inspectors under the direction of Acting Postal Inspector in Charge Marie Kelokates and the U.S. Secret Service, under the direction of Special Agent in Charge James Mottola. He also thanked the U.S. Social Security Administration for its role in the investigation.

The government is represented by Assistant U.S. Attorney Erez Liebermann, chief of the Computer Hacking and Intellectual Property section of the Economic Crimes Unit, and Assistant U.S. Attorneys Daniel V. Shapiro of the General Crimes Unit, Zach Intrater of the Economic Crimes Unit, and Barbara Ward of the Asset Forfeiture Unit of the U.S. Attorney’s Office in Newark.

The charge and allegations contained in the complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

I'd prefer the discussion occur here and the other thread be shut down since its vague and this is detailed.

KYBOSH

Senior Member - 2K

posted: Feb. 6, 2013 @ 6:56a

NY & NJ... should have known!

HawkeyeNFO

Senior Member - 2K

posted: Feb. 6, 2013 @ 8:50a

1 - Report indicates this was going on for at least 5 years, but the investigation took 18 months. -------How were they able to stay under the radar for so long?-------What tipped off the authorities?

2 - They gave info on what countries the money was going.-------Who in those countries was taking the profit? My guess is there are "filters" in those country who then gave the cash to other groups and individuals.

woowoo2

In the crosshairs

posted: Feb. 6, 2013 @ 8:58a

Quote:Ijaz Butt 53 Hicksville, New York

I just knew he was part of it......

RJG

Senior Member

posted: Feb. 6, 2013 @ 8:59a

HawkeyeNFO said: 1 - Report indicates this was going on for at least 5 years, but the investigation took 18 months. -------How were they able to stay under the radar for so long?-------What tipped off the authorities?

2 - They gave info on what countries the money was going.-------Who in those countries was taking the profit? My guess is there are "filters" in those country who then gave the cash to other groups and individuals.I hope they don't answer your first question. Why let the next criminal conspiracy figure anything out?

olvrtw

Senior Member

posted: Feb. 6, 2013 @ 11:52a

now that we have their name/city anyone can find their real address. heh

DaGimp

Senior Member

posted: Feb. 6, 2013 @ 12:30p

oh sh1t Habib is it on it too

neophyte

Addicted Member

posted: Feb. 6, 2013 @ 1:19p

olvrtw said: now that we have their name/city anyone can find their real address. hehYep, there goes the presumption of innocence

I knew some people accused must be here, and probably even more so on creditboards

The problem is - some members here employ the similar techniques and on a similar scale, with a very important distinction of staying legal and going only for rewards.

However if Feds were to comb by these techniques - even being investigated is not fun...

theeipi

Member

posted: Feb. 6, 2013 @ 5:21p

Redefining Heavy Hitters...

sandy05

Senior Member - 3K

posted: Feb. 6, 2013 @ 5:45p

theeipi said: Redefining Heavy Hitters...

They will surely get heavy hitting in prisons.

BEEFjerKAY

Pics?

posted: Feb. 6, 2013 @ 8:08p

HawkeyeNFO said: How were they able to stay under the radar for so long?

Doubt they stayed under the radar for long. The analytics are fairly robust and highly automated.

And the Jersey City connection has long been a focus of attention.

Probably more a factor of 1. the challenge of filtering out the sheer number of other, less clear-cut ML suspects ... which probably would include a fair percentage of FWF patrons2. the opportunity to bag more convictions by letting the scheme run for a while

Wonder what the actual losses are. $200 mm seems small considering the angles the group was using.

BEEFjerKAY

Pics?

posted: Feb. 6, 2013 @ 8:11p

neophyte said: The problem is - some members here employ the similar techniques and on a similar scale, with a very important distinction of staying legal and going only for rewards.

I'm not always convinced all of the techniques would be considered legal. But that's just one random goof's opinion.

tolamapS

Silly Member

posted: Feb. 7, 2013 @ 10:35p

newbietx said: Morons! Throw them in the federal pound me in the a$$ prison for a long time.

Just deport them back to their countries. I have better than 50-50 chance most of them are foreigners, and are either nationalized or still immigrant / non-immigrants.

I would love to work for the LE units that do this kind of work.

KYBOSH

Senior Member - 2K

posted: Feb. 7, 2013 @ 10:37p

tolamapS said: newbietx said: Morons! Throw them in the federal pound me in the a$$ prison for a long time.

Just deport them back to their countries. I have better than 50-50 chance most of them are foreigners, and are either nationalized or still immigrant / non-immigrants.

And the ones who were born and bred here?

money2011

Addicted Member

posted: Feb. 7, 2013 @ 10:48p

I was literally standing outside the jewelry stores when they were raided. THAT was exhilarating. I walk past two of them everyday. They never had any customers inside. They sold what looked like very expensive and well made indian gold. The area is highly populated by indians so it was odd that the window displays never rotated or that customers were never present. i assumed they sold mostly overseas or online.

meanwhile Lloyd Blankfein and the rest of the Wall Street crooks are moving from billion dollar scams to trillion dollar scams...

olvrtw

Senior Member

posted: Feb. 8, 2013 @ 6:19a

Barabas said: meanwhile Lloyd Blankfein and the rest of the Wall Street crooks are moving from billion dollar scams to trillion dollar scams...

they already figured out how to own all americans, they are already working on the rest of the world.

JuNooNi

Addicted Member

posted: Feb. 8, 2013 @ 11:09a

money2011 said: I was literally standing outside the jewelry stores when they were raided. THAT was exhilarating. I walk past two of them everyday. They never had any customers inside. They sold what looked like very expensive and well made indian gold. The area is highly populated by indians so it was odd that the window displays never rotated or that customers were never present. i assumed they sold mostly overseas or online.Hicksville?

HumDoHamaraDo

Happy Member

posted: Feb. 8, 2013 @ 11:50a

JuNooNi said: money2011 said: I was literally standing outside the jewelry stores when they were raided. THAT was exhilarating. I walk past two of them everyday. They never had any customers inside. They sold what looked like very expensive and well made indian gold. The area is highly populated by indians so it was odd that the window displays never rotated or that customers were never present. i assumed they sold mostly overseas or online.Hicksville?j city

nik12ia

Member

posted: Feb. 8, 2013 @ 3:52p

olvrtw said: now that we have their name/city anyone can find their real address. heh

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